Stock Groups

Rivian rolls back big price increases on pre-orders after customer backlash

[ad_1]

R.J. Scaringe is Rivian’s CEO. He introduces his R1T all electric pickup truck and R1S all-electric SUV to the world at the Los Angeles Auto Show, Los Angeles, California on November 27, 2018.

Mike Blake | Reuters

Rivian AutomotiveThe company quickly backed out of a plan that would have seen it increase the prices of vehicles ordered by customers.

Rivian CEO RJ scaringe wrote to all stakeholders Thursday acknowledging that the price hikes on Tuesday “broke trust” Rivian was trying to establish with customers. RJ Scaringe stated that the original price of Rivian will still be applicable to all preorders made before March 1.

Rivian said Tuesday that its quad-motor R1T pickups and R1S SUVs would see their prices rise by $12,000. The increase will also apply to any pending orders.

Customers protested immediately.

Scaringe said, “I have spoken to many of the people over these two days and I am fully aware of how many of them felt.”

Scaringe claimed that price rises were caused by sharply rising costs for key components.

Scaringe stated that “Since initially setting our pricing structure and especially in the recent months, much has changed.” The costs for components and other materials used in building vehicles have increased significantly. Everything from sheet metal to seat covers has become more expensive, and this is why the U.S. average new vehicle prices have risen more than 30% in 2018.

He stated that, given our build lead times, production costs must be planned not just for today but for the future as well.

Wall Street praised the price cut. RBC Capital Markets Analyst Joseph Spak said that the sudden price rise on Tuesday was not a good way to build brand equity and that Rivian’s decision “the right thing” was to reverse the increase in prices on orders that were already placed.

As of 12 noon ET, Rivian shares had fallen by 3.1%

[ad_2]